E-mail drama drives attack on Microsoft

Fiery cross-examinations and surprise e-mail evidence highlighted a dramatic courtroom show here last week as the government opened its antitrust case against Microsoft.

The US Department of Justice and 20 states came out shooting, immediately calling a star witness - Netscape Communications CEO Jim Barksdale - and portraying Microsoft CEO Bill Gates as a manipulative liar.

Despite Microsoft's pretrial complaints about "last-minute" and "desperate" attempts by the government to expand its charges, the two-and-a-half-hour opening statement by the government was tightly focused on the browser war.

Exclusionary contracts with would-be Netscape partners and threats to Netscape were part of Microsoft's plan to "crush" the upstart competitor, said David Boies, lead lawyer for the Justice Department.

He said Microsoft's pressure on Intel and Apple Computer demonstrated a pattern of anticompetitive behavior - the pinnacle of which was the effort against Netscape.

Boies presented e-mail and memos about a June 21, 1995, meeting at Netscape at which Microsoft allegedly proposed dividing the browser market and buying a piece of Netscape.

In a multimedia presentation, Boies contrasted internal Microsoft documents with Gates' deposition, which was videotaped in August.

On video, Gates said his "only knowledge" of the meeting was from a Wall Street Journal article. But in an e-mail to Microsoft officials a few weeks before the meeting, which Boies flashed onto a large monitor, Gates wrote, "I think there is a very powerful deal of some kind we can do with Netscape."

Boies also showed a memo from an America Online executive that corroborates, albeit thirdhand, Netscape's view of that meeting.

Among the other new evidence revealed last week was a Hewlett-Packard memo to Microsoft complaining about having to take Internet Explorer with Windows. "[I]t is hurting our industry. If we had another choice of another supplier, based on your actions here, we would take it," the document read in part.

"They're trying to demonise Bill Gates," said Robert Lande, an antitrust professor at the University of Baltimore School of Law. "If they can undermine Gates' credibility, you're more likely to believe the Netscape version of the facts."

That's important because regardless of how the judge may rule on other charges, a meeting like that is a separate antitrust offense, said Dana Hayter, an antitrust lawyer at Fenwick & West LLP in Palo Alto, California. Even if Microsoft's other behaviours are, in the end, chalked up to being a tough competitor, attempting to divide markets is illegal, Hayter said.

However, during a later cross-examination of Barksdale, John Warden, Microsoft's head lawyer, countered with surprise e-mail from Netscape.

Six months before the meeting, in a secret message sent at 3:01 a.m. on Dec. 29, 1994, Netscape Chairman Jim Clark asked a Microsoft manager to consider buying a piece of Netscape. "Working together could be in your self-interest as well as ours," Clark wrote.

The note is "crucial" to explaining Microsoft's talks with Netscape in June 1995, a Microsoft spokesman later said.

To further undermine Netscape's contention that Microsoft had been hostile, Warden displayed a Netscape employee's own notes from a different Microsoft meeting that he characterised as "very friendly, nonthreatening".

Warden also engaged Barksdale in a verbal duel about Netscape's health, dragging from Barksdale confirmation that the company is in no financial danger and has seen sales growth every year since its April 1994 founding.

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